Question 1

Suppose a market has the demand function Qd=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Accepted Answer

The answer of Suppose a market has the demand function...

Question 2

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Accepted Answer

The price ...

Question 3

Whether a good is a luxury or necessity depends on the

Accepted Answer

A)   price of the good.
B)   preferences of the buyer.
C)   intrinsic properties of the good.
D)   scarcity of the good.E) None of the above
F) A) and B)

Question 4

Table 5-2 
-Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

Accepted Answer

A)   zero.
B)   unit elastic.
C)   inelastic.
D)   elastic.E) None of the above
F) B) and C)

Question 5

Why was OPEC unable to maintain high oil prices in the long run?

Accepted Answer

A)   Demand and supply are both elastic in the long run compared to the short run.
B)   Demand and supply are both inelastic in the long run compared to the short run.
C)   Demand is elastic and supply is inelastic in the long run compared to the short run.
D)   Demand is inelastic and supply is elastic in the long run compared to the short run.E) All of the above
F) C) and D)

Question 6

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Accepted Answer

A)   inelastic, since the price elasticity of supply is equal to 0.68.
B)   inelastic, since the price elasticity of supply is equal to 1.48.
C)   elastic, since the price elasticity of supply is equal to 0.68.
D)   elastic, since the price elasticity of supply is equal to 1.48.E) A) and D)
F) B) and C)

Question 7

Figure 5-4 
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first increase, then decrease until total revenue is maximized.E) B) and C)
F) C) and D)

Question 8

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)   The interdiction has the effect of shifting the demand curve for illegal drugs to the right.
B)   The price elasticity of demand for illegal drugs is 1.3.
C)   The price elasticity of supply for illegal drugs is 0.8.
D)   As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.E) A) and C)
F) B) and C)

Question 9

Scenario 5-5
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-5. The change in equilibrium price will be

Accepted Answer

A)   greater in the milk market than in the beef market.
B)   greater in the beef market than in the milk market.
C)   the same in the milk and beef markets.
D)   Any of the above could be correct.E) None of the above
F) A) and B)

Question 10

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

Accepted Answer

A)   use more fertilizers and weed killers to increase their yields.
B)   plant additional acres to increase their output.
C)   reduce the number of acres they plant to decrease their output.
D)   Both a and b are correct.E) B) and C)
F) All of the above

Question 11

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Accepted Answer

A)   Demand is more elastic on the lower part of the demand curve than on the upper part.
B)   Different pairs of points on the demand curve can result in different values of the price elasticity of demand.
C)   Different pairs of points on the demand curve result in identical values of the slope of the demand curve.
D)   Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total revenue.E) All of the above
F) C) and D)

Question 12

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A)   Both the mayor and city manager would be correct if demand were price elastic.
B)   Both the mayor and city manager would be correct if demand were price inelastic.
C)   The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic.
D)   The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.E) B) and C)
F) A) and D)

Question 13

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Accepted Answer

A)   the availability of close substitutes in determining the price elasticity of demand.
B)   a necessity versus a luxury in determining the price elasticity of demand.
C)   the definition of a market in determining the price elasticity of demand.
D)   the time horizon in determining the price elasticity of demand.E) A) and D)
F) A) and B)

Question 14

Goods with many close substitutes tend to have

Accepted Answer

A)   more elastic demands.
B)   less elastic demands.
C)   price elasticities of demand that are unit elastic.
D)   income elasticities of demand that are negative.E) None of the above
F) All of the above

Question 15

Figure 5-15 
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)   AB
B)   CD
C)   DH
D)   GHE) A) and B)
F) None of the above

Question 16

If the quantity supplied is exactly the same regardless of the price, supply is

Accepted Answer

perfectly ...

Question 17

Figure 5-16 
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Accepted Answer

A)   0.86
B)   1.00
C)   1.17
D)   1.25E) A) and B)
F) None of the above

Question 18

Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Accepted Answer

The price ...

Question 19

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00)  and another point is (quantity supplied= 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   0.2.
B)   0.5.
C)   1.0.
D)   2.5.E) All of the above
F) B) and C)

Question 20

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, the slope is equal to

Accepted Answer

A)   -1/4, and the price elasticity of demand is equal to 2/3.
B)   -1/4, and the price elasticity of demand is equal to 3/2.
C)   -3/2, and the price elasticity of demand is equal to 1/4.
D)   -2/3, and the price elasticity of demand is equal to 3/2.E) All of the above
F) A) and B)

Exam 5: Elasticity and Its Application

Goods with many close substitutes tend to have

Correct Answer
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Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The change in equilibrium price will be

Correct Answer
verified

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

Correct Answer
verified

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Correct Answer
verified

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Correct Answer
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Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Correct Answer
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Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Correct Answer
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The price ...
View Answer

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied= 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

Correct Answer
verified

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

Correct Answer
verified

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Correct Answer
verified

Correct Answer
verified

Why was OPEC unable to maintain high oil prices in the long run?

Correct Answer
verified

If the quantity supplied is exactly the same regardless of the price, supply is

Correct Answer
verified
perfectly ...
View Answer

Suppose a market has the demand function Qd=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Correct Answer
verified

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Correct Answer
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Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Correct Answer
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Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Correct Answer
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The price ...
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If the demand curve is linear and downward sloping, which of the following statements is not correct?

Correct Answer
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Whether a good is a luxury or necessity depends on the

Correct Answer
verified

Exam 5: Elasticity and Its Application

Goods with many close substitutes tend to have

Correct AnswerverifiedShow Answer

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The change in equilibrium price will be

Correct AnswerverifiedShow Answer

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

Correct AnswerverifiedShow Answer

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Correct AnswerverifiedShow Answer

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Correct AnswerverifiedShow Answer

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Correct AnswerverifiedShow Answer

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Correct AnswerverifiedThe price ...View AnswerShow Answer

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied= 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

Correct AnswerverifiedShow Answer

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why was OPEC unable to maintain high oil prices in the long run?

Correct AnswerverifiedShow Answer

If the quantity supplied is exactly the same regardless of the price, supply is

Correct Answerverifiedperfectly ...View AnswerShow Answer

Suppose a market has the demand function Qd=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Correct AnswerverifiedShow Answer

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Correct AnswerverifiedShow Answer

Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Correct AnswerverifiedThe price ...View AnswerShow Answer

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Whether a good is a luxury or necessity depends on the

Correct AnswerverifiedShow Answer

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The price ...
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perfectly ...
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The price ...
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